Phenol

17 December 2001 00:00  [Source: ICB]

Profitability has to recover to stimulate the investment needed to meet future consumer demand

Uses



Phenolic resins and bisphenol-A (BPA) are the main consumers. BPA, used in polycarbonate, has become the dominant user with about 35% of the global market. Phenolic resins, which consume about 32% of phenol output worldwide, are used to make adhesives, binders for insulation and moulding compounds. About 15% of phenol goes into the fibre intermediate caprolactam. Strong growth, albeit from a small base, is expected for phenol via ortho-xylenol used in polyphenylene oxide (PPO) engineering plastics. Other derivatives are alkylphenols, adipic acid, aniline, chlorinated phenols and diphenols. It is also used in pharmaceuticals, acetylsalicylic acid and paracetamol.

Supply/demand



Global markets remain fundamentally oversupplied and demand is weak. Operating rates at European plants were reduced to about 70% mid-year as the slowdown intensified. Good consumption in 2001 into BPA/polycarbonate in the early part of 2001 dropped sharply mid-year with buyers cutting back or cancelling orders. CMAI consultancy said phenol consumption is expected to be down 25-30% on 2000. The temporary closure of Domo's plant, following an explosion and fire in October, has had no impact on the market. The unit could be down for repair work until quarter two next year. Ineos has bought Phenolchemie for E422m ($370m) from Degussa, and Sabic has signed an initial contract to take 60% in EniChem's phenol assets. Poor market conditions have forced Ertisa to shelve its second-stage expansion. The additional 50 000 tonne/year line was due to start in quarter four this year.

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Pricing



European prices have declined throughout the year, with the decline accelerating in the second half. First quarter contract prices were DM1840-1860/tonne FD. This eroded to DM1180-1215/tonne in quarter four. Margins, although not negative, are poor and have contracted a lot, says CMAI. US margins are much worse and numbers have weakened again. A 3 cent/lb drop in quarter three has been followed by a 1.5 cent/lb fall this quarter, taking the contract price to 28 cent/lb. Asian prices in December were quoted at $430-450/tonne CFR China.

Technology



There are three routes to phenol. Cumene-based technology is the dominant process and is said to be the most economic, supported by demand for coproduct acetone.

A few producers use an older process involving the hydrolysis of chlorobenzene. A third route is DSM's liquid phase oxidation of toluene.

Research concentrates on avoiding the coproduction of acetone. A one-step process directly from benzene has been developed by Russia's Boreskov Institute of Catalysis and Solutia, but plans to build a commercial plant in Pensacola, US, based on the new Alphox route have been suspended. Mitsui Petrochemical has a new acetone-free process where benzene is partially hydrogenated to cyclohexane, then converted to cylohexanol and dehydrogenated to phenol.

Health and safety



Pure phenol occurs as colourless to yellow crystals which turn pink on exposure to light and air. It is solid at ambient temperatures and is normally sold in bulk quantities as a heated liquid. It reacts with oxidants and is a fire and explosion hazard forming toxic sooty fumes on burning. Vapours are corrosive to body tissues. It is rapidly absorbed through the skin causing systemic poisoning.

Outlook



Poor economics are forcing smaller producers to consider exiting the business. Players say Mexico's Fenoquimia and US firms such as Frontier Oil and JLM are looking to quit. Small units in eastern Europe could also be candidates for closure. CMAI expects long-term demand growth of 6%/year worldwide. Growth will be driven mainly by BPA/PC and PPO, which have forecast growth rates of 8-10%/year. No new capacity is needed for the next three years, but from 2004 additional capacity equivalent to one worldscale plant per year will be needed. Several projects are currently being considered in Asia. However, profits need to improve to encourage reinvestment.

MAJOR GLOBAL PhENOL CAPACITY, '000 TONNE/YEAR



Company Location Capacity
Borealis Porvoo, Finland 130
Chiba Phenol Chiba, Japan 200
Domo Caproleuna
Leuna, Germany 150
Dow Chemical Freeport, Texas, US 295
DSM Botlek, Netherlands 110
EniChem Mantova, Italy 300
Porto Torres, Italy 180
Ertisa Huelva, Spain 370
Formosa Plastics
Mailiao, Taiwan 200
GE Plastics Mount Vernon,
Indiana, US 340
Georgia Gulf Pasadena, Texas, US 73
Plaquemine,
Louisiana, US 227
Ineos Phenol Antwerp, Belgium 420
Gladbeck,Germany 630
Theodore, Alabama, US 400
Kumho P&B Yeochon, South Korea 120
Mitsubishi Chemicals
Kashima, Japan 190
Mitsui Chemicals
Chiba, Japan 190
Sakai, Japan 200
Mitsui Phenol Pulau Sakra, Singapore 200
Nippon Steel Tobata, Japan 150
Petrobrazi Brazi, Romania 75
Rhodia Paulinia, Brazil 130
Roussillon, France 105
Sasol Sasolburg, South Africa 40
Shell Deer Park, Texas, US 535
Sunoco Frankford, Pennsylvania,
US 470
Haverhill, Ohio, US 428
Taiwan Prosperity
Lin Yuan, Taiwan 120


Source: CMAI





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